Genesco Inc. GCO is expected to report second-quarter fiscal 2016 results on Sep 3. In the last quarter, the company had delivered a negative earnings surprise of 25%. Let’s see how things are shaping up for this announcement.

Factors Influencing this Quarter

We remain impressed with the company’s persistent omni-channel endeavors which are likely to be the key growth drivers. However, Genesco has underperformed the Zacks Consensus Estimate by an average of 19.6% over the past four quarters, delivering a negative surprise in every quarter. Further, the ongoing challenges in the Lids Sports Group segment led management to lower its outlook for fiscal 2016. Management hinted that the Lids Sports Group's turnaround would result in further gross margin pressure and additional expenses than originally expected. Consequently, we remain cautious about the upcoming results.

Earnings Whispers

Our proven model does not conclusively show that Genesco is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. This is not the case here, as you will see below:

Zacks ESP: Earnings ESP for Genesco is currently pegged at -8.00%. This is because the Most Accurate estimate of 23 cents stands below the Zacks Consensus Estimate of 25 cents.

Zacks Rank: Genesco carries a Zacks Rank #3 (Hold). Though a Zacks Rank #3 increases the predictive power of ESP, the company’s ESP of 0.00% makes surprise prediction difficult.

We caution against stocks with a Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks that Warrant a Look

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Five Below Inc. FIVE has an Earnings ESP of +7.69% and a Zacks Rank #2 (Buy).

Conns Inc. CONN has an Earnings ESP of +17.02% and a Zacks Rank #3.

Rite Aid Corp. RAD has an Earnings ESP of +33.33% and a Zacks Rank #3.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
RITE AID CORP (RAD): Free Stock Analysis Report
 
FIVE BELOW INC (FIVE): Free Stock Analysis Report
 
CONNS INC (CONN): Free Stock Analysis Report
 
GENESCO INC (GCO): Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research